At the end of September, I wrote about the ‘October Effect’ on FTSE 100 shares. Because many investors believe that stock markets are likely to crash in October, they sell their shares — which is what actually causes them to dip.
And yes, there’s plenty of other reasons why some stocks are falling right now. Inflation, rising interest rates, supply chain issues, the labour shortage, and energy crisis are all causing jitters. However, I think now is a great time for me to buy resilient FTSE 100 shares that have fallen on fear, not fundamentals.
FTSE 100 mining and manufacturing
Rio Tinto is one of the largest miners in the world, producing iron, copper, gold, diamonds, and uranium. At 4,095p, its share price is down more than 7% in the past month. This is despite generating $13.7bn of revenue in H1 2021, 143% higher than in H1 2020. It has also spent $324m so far this year on exploration (PDF). And it has positioned itself as the largest source of lithium in Europe, which appeals to me as a believer in the EV revolution. Okay, iron ore prices have fallen dramatically since May, due to weakened Chinese demand. But I think that as long as the Evergrande situation doesn’t develop into a Chinese financial crisis, iron prices will go back up, and Rio Tinto shares with them.
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Melrose Industries buys struggling engineering companies before turning them around and selling them at a profit. At 165p, its share price is down 8% in the past month and 16% year-to-date. Unfortunately, the company was invested in multiple aerospace-dependent companies prior to the pandemic, which have sustained huge losses. And its automotive divisions are also losing money. That’s because even though demand is strong, the semiconductor shortage is making it impossible to deliver orders on time. Raw material price increases are also hurting the FTSE 100 company’s bottom line. But I think that these are short-term issues. Once they’re resolved, the share price could shoot back up.
Betting and publishing
Entain is the global sports betting and gaming company that owns Ladbrokes and Coral. Its share price has dipped to 2,073p over the past week, but it’s still up almost 100% over the past year. Competitor DraftKings has approached the company with a £16.4bn takeover offer. Moreover, Q3 results showed it’s had 23 quarters in a row with double-digit online growth. BetMGM, its partnership with MGM Resorts, held a 23% market share across the US in sports betting between June and August. So the FTSE 100 stalwart could become the biggest sports betting operator in America. However, a regulatory crackdown is becoming increasingly likely.
Informa is a publishing, business intelligence, and exhibitions group. Its share price is 553p today, down from 582p a week ago, but up from 475p in July. The company was hit hard by the pandemic, as it was unable to run the exhibitions that make up a core part of its business strategy. But it has been on the rise since ‘Freedom Day’ back in July. I think that as the country unlocks, revenue will increase and its share price will soar. In H1 2021 results, it posted a strong free cash flow of £134m, almost double the £71m of H1 2020. It also reduced net debt by £100m to £1.89bn. Of course, any future lockdown would hit the FTSE 100 firm hard.
